{{$store.state.data.search.serverData.config.placeholder}}

{{ vm.heading }}

{{ vm.closeTabLabel }}

Notice of updates
!

Since the last time you logged in our privacy statement has been updated. We want to ensure that you are kept up to date with any changes and as such would ask that you take a moment to review the changes. You will not continue to receive KPMG subscriptions until you accept the changes.

Hi
!

Our privacy policy has been updated since the last time you logged in

We want to make sure you're kept up to date. Please take a moment to review these changes. You will not receive KPMG subscription messages until you agree to the new policy.

Relaterat innehåll

The EU has not wasted any time following the recommendations of the High-Level Expert Group on sustainable finance, which launched its report in end-January 2018. Sustainable finance puts Environmental, Social and Governance (ESG) considerations in the core of the financial system to support the transformation of Europe's economy into a greener, more resilient and circular system. The definition of responsible investment is very similar.

On 24 May 2018, the EU published its first batch of legislative proposals on sustainable finance, the first concrete steps of its bold action plan in this area, published earlier in May. With this action plan, the EU has shown its intent to become a world leader in sustainable finance.

With all this recent activity, let us examine the immediate impacts for those in the financial marketplace.

The main actions proposed by the EU

The mainstreaming of sustainability in finance is to be effected via ten specific actions:

Note this

Given its broad application, this action plan will undoubtedly affect the entire financial market, from banking and asset management to insurance and pension funds. The impact will first and foremost be felt through imminent legislative changes, both through amendments to existing legislation and through new regulations and standards. The action plan strongly encourages responsible investment, which affects the way capital is allocated in the investment universe. From corporates point of view, ESG filters impacts on the cost of capital. It is preferable to position your company in the typical eligible part of the investment universe of investors.

Expected changes to existing regulation

The new action plan puts the interests of potential investors in the centre. To ensure that sustainability factors are in compliance with investors’ preferences, the EU will amend MiFID II and IDD regulatory frameworks for banks and insurers respectively. Additionally, the Commission will specify the content of the prospectus for green bonds issuance, to guarantee that investors receive the needed information.

To further enhance sustainability considerations in banking sector, the Commission will also explore the feasibility of the inclusion of climate-related risks in risk management functions and the potential calibration of banks’ capital requirements.

Future regulation

As mentioned above, the first legislation package of the action plan was released in May. It contains proposals for three new regulations:

A regulation on the establishment of a taxonomy for sustainable investments and products: this regulation would establish the conditions and framework to gradually create a unified classification system (“taxonomy”) for what can be considered an environmentally sustainable economic activity. This is the first and essential step in the efforts to channel investments into sustainable activities.

A regulation on disclosures relating to sustainable investments and sustainability risks and amending Directive (EU) 2016/2341: this regulation would introduce disclosure obligations on how institutional investors and asset managers integrate environmental, social, and governance (ESG) factors into their risk processes. Requirements to integrate ESG factors into investment decision-making processes, as part of their duties towards investors and beneficiaries, will be further specified through delegated acts.

A regulation amending benchmark regulation: this amendment would create a category of benchmarks comprising low-carbon and positive carbon impact levels, providing investors with better information on the carbon footprint of their investments.

In addition, the Commission is, from 24 May to 21 June, seeking feedback on amendments to delegated acts under:

the Insurance Distribution Directive (IDD)—specifically on whether to include ESG considerations in the advice that investment firms and insurance distributors must offer to individual clients

Takeaway

The future of sustainable finance is here! The EU’s vision for sustainable growth is impressive, and means several important regulatory changes with wide-ranging impacts. To keep up with the pace, finance market members should be as proactive as possible.

KPMG’s network of professionals within responsible investment and sustainable finance will keep a close eye on the EU’s further actions and new developments.

KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.